What was it like to retire in 1950?

It may be difficult for young people today to imagine a world without the Internet, but for those of us born before 1950, it was the world we grew up in. It was also a world without universal superannuation. And that meant life was pretty tough for some.

Fend for yourself

At the turn of the 20th century, there was no social security system in Australia. If you weren’t working, it was fend for yourself. When people got too old to work, they had to self-fund their retirement. This was particularly hard on widows and invalids, who didn’t have the opportunity to save over their working life, and had to rely on charitable relief provided by voluntary organisations.¹

Then in 1908 Australia introduced the Age Pension. However, it’s important to understand the Age Pension was never intended to offer a ‘comfortable living’. It was always designed to be a modest benefit based on need. Although the ‘means test’ has gone through many changes since then, essentially the Age Pension remains the same today – a benefit targeted at those most in need, while remaining affordable for the government.²

However, throughout the first half of the 20^th century, there were a few lucky white-collar workers who received a pension, provided by their employer.³ This was the early form of what we know today as superannuation.

The slow spread of super

Right up to the 1950s and 60s, income in retirement for most Australians was the Age Pension, or for just a lucky few, a private pension. After several failed attempts at introducing national superannuation, private superannuation became more widely available in the 1980s, when the unions negotiated its inclusion in industrial awards.² But in 1974, still only 32% of the workforce was covered by super, and nearly all were men.³

The modern three pillar system

The breakthrough came in 1991 when the Hawke-Keating government in an effort to restrain inflation, while still giving employees a wage rise, introduced the Superannuation Guarantee. The intended 3% wage rise was instead paid into newly established ‘industry funds’. And by the end of 1992, more than 80% of workers had super.

This led to the modern Australian retirement income system we have today. The system comprises three elements:

• a government provided means tested age pension
• mandatory personal superannuation; and
• voluntary saving (including voluntary saving into super).²

This system has increasingly become viewed as a model for other countries. The World Bank endorsed it in its report Averting the Old Age Crisis, saying Australia's three pillars approach offered the best prospect of being sustainable servicing an aging population, while improving national savings and providing higher incomes in retirement.²

The benefits you enjoy today

The super system we have today has given us all vastly better opportunities to enjoy life in retirement. No longer do most of us have to subsist on a barely adequate Age Pension. Today, we all have the ability to add to our retirement income through our super.

Despite some complexity in the rules, the preferential tax rates on contributions and post retirement income has made super an attractive way to save. What is more, the ability to draw down regular payments from an income stream in retirement means you can remain with the same fund right through your working life and retirement. ESSSuper is proud to be able to offer all these benefits to our members, as part of one of the world’s best retirement income systems.